Heliostar Metals Secures $10M in Debt Facilities to Fund Mexican Gold Asset Acquisition
Heliostar Metals (TSXV: HSTR) has announced it has arranged two debt facilities totaling up to $10 million to support its acquisition of key production assets in Mexico. The financing will help Heliostar complete its purchase of a portfolio of gold assets previously owned by Argonaut Gold and transition from a development-stage company into a producing gold company with immediate cash flow.
The financing includes two debt facilities: a $5 million working capital facility with Ocean Partners USA, Inc. and a separate $5 million transaction closing facility with Deans Knight Capital Management Ltd. Both facilities are designed to provide Heliostar with the capital needed to finalize the acquisition of the Mexican asset portfolio and advance its gold production capabilities.
“This financing is a significant advancement for Heliostar and our shareholders,” said CEO Charles Funk. “We are now in the enviable position of having all the capital required to close the acquisition of Mexican assets from the former Argonaut Gold and accelerate the development of our assets for less than one percent equity dilution.”
The acquisition, which is set to close in November 2024, positions Heliostar to become a gold producer, with projected annual production of 150,000 ounces of gold within the next three years.
The debt facilities
Heliostar’s first source of financing comes from a $5 million working capital facility arranged with Ocean Partners, a global metals trading firm. This facility is structured around the San Agustin mine, one of the key assets Heliostar is acquiring in Mexico. Under the terms of the agreement, Ocean Partners will purchase 100% of the gold produced from San Agustin’s leach pads over a minimum of six calendar months, with a required minimum delivery of 7,500 ounces of payable gold.
The working capital facility allows Heliostar to draw on the funds in three equal monthly tranches, with each advance capped at 40% of the estimated recoverable gold. The facility comes with an interest rate based on the 3-month CME Term SOFR plus 4%, which currently brings the total rate to approximately 9.4%. The financing matures on December 31, 2025.
Each time Heliostar draws from the facility, it commits to delivering 750 ounces of payable gold for every $1 million borrowed. These payments will be drawn from the gold output of the San Agustin mine.
According to Heliostar, the funds from this facility will be used to support ongoing working capital needs and advance other development projects within its portfolio.
In addition to the working capital facility, Heliostar has secured up to $5 million from Deans Knight Capital Management in the form of senior secured term notes. This transaction closing facility will help Heliostar meet the $5 million final payment due for its Mexican asset acquisition. The notes carry an interest rate of 15% and will mature on November 30, 2026. However, Heliostar is under no obligation to draw the full amount from the facility unless needed to close the acquisition.
“Following the closing of the acquisition, Heliostar will become a producing gold company with immediate cash flow, a healthy working capital balance, and a strong position to grow our production base,” Funk added.
This financing is a major pivot for Heliostar as it transitions from an exploration company to a production-oriented business. With the acquisition of assets from Argonaut Gold, including the San Agustin mine, Heliostar is moving closer to its goal of producing 150,000 ounces of gold annually within the next three years.
The financing also signals a departure from a previously considered $20 million gold-linked debt facility announced in May 2024. Heliostar decided to abandon this more expensive form of financing in favor of the new debt arrangements with Ocean Partners and Deans Knight, which come with more favorable terms.
The regulatory approval process for the financing is currently underway, and Heliostar has agreed to issue 1.5 million common shares to facilitate the loan establishment. Once the acquisition closes in November, the company will be ready to move forward with its production goals, setting the stage for further growth in the competitive gold mining sector.
Ivanhoe Mines last traded at $0.30 on the TSX Venture.
Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
